Failure to find a COVID vaccine by the end of 2021 could be a $55bn blow to the economy

If a COVID-19 vaccine is not developed and used widely throughout Australia by the end of 2021, it could see a $55 billion blow to the economy. Here's why it’s set to be so much more than just a cure for the virus.

A COVID-19 vaccine will need to be developed and used widely throughout Australia by the end of next year for even the grim Budget figures to come to pass.

If the predictions used to underpin the Budget are wrong it could see a $55 billion blow to the economy.

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The tumultuous nature of the crisis means there is a great deal of uncertainty around the predictions, but how they came to those conclusions have given an insight into the year ahead – and suggest people should hold off booking any overseas holidays.

It is expected there will be 8 per cent unemployment, a shrinking economy this year before bouncing back next year, and a deficit of $213 billion.

But this is based off a series of key assumptions, including that a population-wide COVID-19 vaccine is in place by late next year and that general social distancing restrictions remain until it does.

It is also expected that state borders are lifted by the end of this year, except WA which is predicted to remain closed until April 2021 after its state election.

There are also assumptions that Victoria’s harsh lockdown and restrictions gradually lift over the rest of this year, with it starting to come in line with the other states as the outbreak comes under control.

Room for some localised outbreaks of COVID-19 has been given, if they are kept largely contained.

Treasurer Josh Frydenberg said if a vaccine was developed six months earlier than expected, there would be a $34 billion boom for the economy as businesses start to return to normal.

But he warned if there was a third wave of the disease, it would take a $55 billion sledgehammer to the economy.

“There is a lot of uncertainty in this economic environment. We are in unprecedented times,” he said.

“We are leaving no stone unturned to get access to the vaccine.”

The assumptions also predict the inbound and outbound international travel will remain low until late 2021, with a gradual return of overseas tourism after that.

But there will be opportunities for international students to slowly return before then, through small pilot programs with COVID-safe plans.

A draft plan developed by the university sector and Study Queensland is with the Queensland Chief Health Office, but has yet to be assessed.